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Justice. Only Justice Shall Thou Pursue

Sunday, January 09, 2011

Analysis of ARC Tunnel Expenditures Shows Gov. Christie Was Right To Stop Project

Critics have lambasted Gov. Chris Christie for killing the ARC Tunnel project that would have increased capacity on NJ Transit into Manhattan by building two tunnels to a new platform area in Manhattan. Christie killed the project because costs were expected to spiral out of control well over the $8.7 billion projected cost.

New Jersey would have borne the costs for all the overruns and Christie reasoned that New Jersey taxpayers simply should not bear those costs.

Instead, New Jersey will pay for the cancellation costs and critics have pounced on those costs.

The sale price for that baker's dozen of properties and easements: $28 million.

Project billing records examined by The Record, however, show that the actual cost mounted well past $40 million with the addition of $12.2 million in fees and expenses for the state's legion of special consultants.

"This is just more evidence that this ill-conceived project was not well-managed and costs were unpredictable," said Mike Drewniak, a spokesman for Christie.

Only a fraction of total

Real estate costs in New Jersey were only a fraction of the $600 million already laid out for the ill-fated tunnel project. Preliminary engineering, design services and insurance costs soaked up more than $400 million of that amount.

But the records detailing ARC's real estate program are significant because they confirm concerns by critics that the project expenses were prone to skyrocket as droves of consultants signed on.

Those concerns were generated in part by federal transit officials, who feared that New Jersey had failed to install adequate measures to control costs, especially those involving property negotiations that can become hugely complex and expensive.

Of the 13 properties and easements obtained for ARC, for example, 11 had to be taken via condemnation. Before the project began in earnest, state officials said they hoped to reach agreement with most property owners without resorting to the courts and eminent domain.

Officials at NJ Transit, the state agency overseeing ARC, point out that the Port Authority spent far more — $150 million — working on Manhattan real estate issues connected to ARC.

And they said the project was the largest venture of its kind in the nation, a hugely complex undertaking that had no real precedent. The Federal Transit Administration acknowledged in May that its failure to establish clear guidelines for the project hindered NJ Transit's ability to meet goals and contain costs.

"Every effort was made to use scarce public money as wisely as possible," said Paul Wyckoff, an NJ Transit spokesman, noting that property acquisition was progressing despite some unexpected snags. "In some ways, there was really not a lot of precedent to go on. We had to find our way. We did everything we were asked to do."

NJ Transit is trying to shift blame for the mess, and claims that the Port Authority spent more on real estate acquisitions, but that ignores that the taxpayer protections to avoid unnecessary cost overruns were not in place and that the project was already being mired in overruns that would only dramatically increase as the project moved forward.

In fact, one of the more troubling expenditures wouldn't even affect the tunnel itself, but that the state would be on the hook for environmental remediation of a purchased parcel that could reach into the tens of millions of dollars.

Even the New Jersey chapter of the Sierra Club recognizes that Christie made the right decision:

"The ARC tunnel was EnCap on wheels," said Jeff Tittel of the New Jersey Sierra Club. "All the same elements are there, even some of the same people who gave us EnCap: Overpaying for tainted land, consultants making millions, the lack of internal controls.''

"The governor took a lot of heat for killing ARC," Tittel said. "But a look at these bills shows that his concerns about money were not misplaced."

The project was ill-conceived and the costs simply were not justified. It is better to pay the costs for killing the project now and repurposing the money that would have been spent on ARC on other critical infrastructure rebuilding than to spend billions on a project whose ultimate cost would have cost overruns of billions more.

Paul Mulshine claims that Christie is somehow going back on his pledge not to irresponsibly borrow, but how can he reconcile that position when the state would be borrowing billions on the ARC project with no protection against billions in overruns - that would lead to billions more in borrowing? No, Mulshine ignores the fiscal realities and that the state cannot impose still more taxes to pay for everything on its plate. Building a new project while ignoring deficient infrastructure shows that the state's priorities are all out of whack. Getting the existing infrastructure up to snuff is key and then new infrastructure can be considered. Moreover, the federal government refused to cover the cost overruns to keep the ARC project alive, so the state would have been on the hook for overruns while the feds and New York skirt their obligations on the interstate project.